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Equity and fixed income markets as drivers of securitised real estate

  • Cheong, Chee Seng
  • Gerlach, Richard
  • Stevenson, Simon
  • Wilson, Patrick J.
  • Zurbruegg, Ralf

This paper re-examines the sensitivity and importance of interest rates and stock market price behavior on securitised property by decomposing their long-run impact between transient and permanent effects. This is achieved in a framework that accounts for endogenously determined structural breaks within the data. The results provide a different perspective on the relationship securitised property has with these markets and sheds new light on their long-run interaction. Once structural breaks are accounted for the results show that securitised property is driven by both interest rate and stock market changes, regardless of the type of securitised property being examined. Evidence also points to companies with increased debt-to-asset ratios and companies that are tax-exempt entities are still all influenced by both the equity and fixed income markets over the long-run period, although the influence these factors have do vary across time.

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File URL: http://www.sciencedirect.com/science/article/B6W61-4SDPXBB-1/2/89b8c443209f3108282a8a33d6488726
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Article provided by Elsevier in its journal Review of Financial Economics.

Volume (Year): 18 (2009)
Issue (Month): 2 (April)
Pages: 103-111

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Handle: RePEc:eee:revfin:v:18:y:2009:i:2:p:103-111
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620170

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  1. Kenneth T. Rosen, 1984. "Toward a Model of the Office Building Sector," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 12(3), pages 261-269.
  2. Glascock, John L & Lu, Chiuling & So, Raymond W, 2000. "Further Evidence on the Integration of REIT, Bond, and Stock Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 20(2), pages 177-94, March.
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  7. Sweeney, Richard J & Warga, Arthur D, 1986. " The Pricing of Interest-Rate Risk: Evidence from the Stock Market," Journal of Finance, American Finance Association, vol. 41(2), pages 393-410, June.
  8. Allen, Marcus T & Madura, Jeff & Springer, Thomas M, 2000. "REIT Characteristics and the Sensitivity of REIT Returns," The Journal of Real Estate Finance and Economics, Springer, vol. 21(2), pages 141-52, September.
  9. Ling T. He, & James. R. Webb & Neil Myer, 2003. "Interest Rate Sensitivities of REIT Returns," International Real Estate Review, Asian Real Estate Society, vol. 6(1), pages 1-21.
  10. Swanson, Zane & Theis, John & Casey, K Michael, 2002. "REIT Risk Premium Sensitivity and Interest Rates," The Journal of Real Estate Finance and Economics, Springer, vol. 24(3), pages 319-30, May.
  11. Inoue, Atsushi, 1999. "Tests of cointegrating rank with a trend-break," Journal of Econometrics, Elsevier, vol. 90(2), pages 215-237, June.
  12. Patric H. Hendershott & Colin M. Lizieri & George A. Matysiak, 1999. "The Workings of the London Office Market," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 27(2), pages 365-387.
  13. Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
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